FAR 3-5 - Sheet1 Flashcards

Question

Q1025. What's the difference between Group & Composite depreciation?

Answer 1

A1025. 1 Group-Assets have similar service lives, no G or L's recognized, CR asset DR ad for same amount less any proceeds received in disposition. 2. Composite-have a wider range of service lives. Determined by calculating the annual depreciation expense for each asset, adding them up, and putting as a % of total cost of assets.

Answer 2

A1026. Decreases NI, Net A/R, current assets & working capital.

Answer 3

A1027. It's equal to the cash proceeds received.

Answer 4

A1028. 1 With recourse 2 Without recourse

Answer 5

A1029. At PV or value of the property, good or service exchanged, whichever is more clearly determinable.

Answer 6

A1030. Interest is included in the face amount.

Answer 7

A1031. AT PV. The difference between the FV & cash payments is recognized as interest revenue over the contract life and is recorded as part of the cost of the related merchandise.

Answer 8

A1032. 1 PV Method - PV of future principal & interest cash inflows. 2 Market Price Method - loans observable market price 3 FV of collateral method - FV of collateral pledged, if the loan is collateral dependent, if foreclosure use this method.

Answer 9

A1033. Current Inc

Answer 10

A1034. Trading & AFS

Answer 11

A1035. At Cost

Answer 12

A1036. Cash, evidence of an ownership interest in an entity or contract that does both: obligation & right

Answer 13

A1037. In current income

Answer 14

A1038. OCI

Answer 15

A1039. 1. Cost 2. Equity 3. Consolidated

Answer 16

A1040. Yes. Difference between the carrying amount of the investment and its sale price.

Answer 17

A1041. Carrying amount of the investment at the date of the change.

Answer 18

A1042. If other than temporary

Answer 19

A1043. Debt

Answer 20

A1044. Dividend distributions in excess of earnings subsequent to acquisition.

Answer 21

A1045. Trading or AFS

Answer 22

A1046. Upon disposal to the extent that the proceeds received differ from the carrying amount of the investment.

Answer 23

A1047. Dr Receivable Cr Investment

Answer 24

A1048. Yes. Between the investment and the rights. Based on the ratio of the market value of the stock & the market value of the rights.

Answer 25

A1049. No. except for liquidating dividend

Answer 26

A1050. Debit: Investments Credit: Inv Inc

Answer 27

A1052. Equity

Answer 28

A1053. Relative to their FV's.

Answer 29

A1055. No. But FV must be disclosed!!

Answer 30

A1056. Unrealized holding gain & its in OCI

Answer 31

A1057. Write the investment down to FV & a realized loss is recognized in current earnings.

Answer 32

A1058. Yes

Answer 33

A1059. Yes. Change in the method of accounting must be made to the cost method.

Answer 34

A1060. Equity or Debt

Answer 35

A1061. Amortized cost

Answer 36

A1063. Unrealized holding gain & it's in current income.

Answer 37

A1064. Market Adjustment Account

Answer 38

A1065. At cost

Answer 39

A1067. They are made to avoid double counting in regular income G or L's realized previously included in OCI as unrealized G or L's.

Answer 40

A1068. G or L's in earnings.

Answer 41

A1069. A or L, FV is used to measure them.

Answer 42

A1070. Change in FV is either recorded in income or OCI.

Answer 43

A1071. 1 Percentage of sales method. 2 Percentage of outstanding receivables method.

Answer 44

A1072. Because they are rights & obligations.

Answer 45

A1073. Difference between the net proceeds & the cost or unamortized cost of the security . NOT FV!!!!

Answer 46

A1074. Yes

Answer 47

A1075. A risk management strategy to protect against the possibility of loss, such as from price fluctuations.

Answer 48

A1076. A number of currency units, shares, bushels, pounds or other units. sometimes called a face amount in some contracts.

Answer 49

A1077. The Buyer

Answer 50

A1078. Trade Disc = 20%, 10% List Price $100 $100-20%($100)=$80 $80-10%($80)=$72

Answer 51

A1079. Reinstatement AR Allowance Payment Cash AR

Answer 52

A1080. The Seller

Answer 53

A1081. 1 FV Hedge - a hedge of the exposure to changes in FV of an A or L, or an unrecognized firm commitment. 2 CF Hedge - " " variable cash flows on an existing, recognized A or L. 3 Foreign Currency Hedge

Answer 54

A1082. Depends on which of the following 3: 1 FV Hedge - reported in earnings 2 Cash Flow Hedge - effective portion reported in OCI, ineffective portions reported in earnings 3 Hedge of a Net Inv in Foreign Operation - same as 2

Answer 55

A1083. Has 3 Characteristics a. Underlying & Notional Amount or Payment Provision b. Zero or small investment c. Net Settlement

Answer 56

A1084. Recognize in earnings immediately!

Answer 57

A1085. Report in OCI account & amortize over the security's remaining life.

Answer 58

A1086. Gross selling price of the security less brokerage commissions & taxes.

Answer 59

A1087. Recognize in OCI

Answer 60

A1088. It's a specified interest rate, security price, commodity price, foreign exchange rate, index of prices or rates or other variable.

Answer 61

A1089. Yes

Answer 62

A1090. When a group of varying items are purchased at a single lump sum (basket purch), allocation based on their relative sales value.

Answer 63

A1091. Revenue

Answer 64

A1092. LCM

Answer 65

A1093. Cost of DM, DL, both variable & fixed manufacturing OH.

Answer 66

A1094. No, its a selling expense.

Answer 67

A1095. trade/cash disc, freight in, taxes, insurance while in transit, warehouse costs & similar charges paid to bring to its existing condition & location.

Answer 68

A1096. Every time the EI stated at base year dollars exceeds the BI stated at base year dollars.

Answer 69

A1097. When received!

Answer 70

A1099. In year of adoption Total Inv Cost / # of units

Answer 71

A1100. Yes

Answer 72

A1101. Estimated selling price less reasonably predictable costs of completion & disposal

Answer 73

A1102. Yes

Answer 74

A1103. Quantity LIFO

Answer 75

A1104. EI valued at current year costs / EI at base year costs

Answer 76

A1105. No, add markups, markdowns & sales are subtracted from retail to get ending inv at retail.

Answer 77

A1106. Yes

Answer 78

A1107. LIFO Retail

Answer 79

A1108. If LCM is applied item by item to each component of inventory.

Answer 80

A1109. To have a lower ratio to ending inv, it helps approximate lower of average cost or market?

Answer 81

A1110. 1. Weighted Average, LCM 2. LIFO Retail 3. DVL Retail

Answer 82

A1111. NRV - normal profit

Answer 83

A1112. Same as LIFO retail.

Answer 84

A1113. LIFO retail, results in a smaller denominator for the ratio, & thus a higher ratio is obtained.

Answer 85

A1114. 1. Gross Margin Method (not GAAP) 2. Retail Method

Answer 86

A1115. Compute the PV of the principal & interest payments for each series separately

Answer 87

A1116. Period Cash Interest Payments Interest Expense Premium Amortized Unamortized Premium Carrying Value

Answer 88

A1117. Based on relative FV's. Note: If the FV of one security is not determinable, the proceeds are assigned based on the FV of the other security. Warrants are accounted for as Paid In Capital

Answer 89

A1118. Book Value Method (No G or L recognized) Market Value Method

Answer 90

A1121. Legal Fees, accounting fees, underwriting commissions, registration, printing & engraving & other costs incurred in preparing and selling a bond issue.

Answer 91

A1122. Extinguishment includes the reacquisition of debt securities. Refunding - you're using proceeds from issuing other securities for the reacquisition.

Answer 92

A1123. When stated interest rate = market rate

Answer 93

A1124. 1. HTM Securities 2. Serial & Term Bonds 3. Debenture 4. Callable 5. Convertible

Answer 94

A1125. It decreases them

Answer 95

A1126. Amortize over the period from the date of sale to the maturity date!!

Answer 96

A1127. Capitalized at its PV.

Answer 97

A1128. Both current & noncurrent. Current portion being money being paid on prin the next year.

Answer 98

A1129. When the lessee can purchase the leased prop for significantly less than the expected FV of the prop at the date option becomes exercisable.

Answer 99

A1130. By the effective interest method or allocation of lease payments method.

Answer 100

A1131. If carrying amount of the asset may not be recoverable. Estimate the future net cash flows; & without discounting or considering interest charges, if future cash flows is less than the carrying amount, impairment loss is recognized. Impairment loss recognized is the amount by which the carrying amount of the asset exceeds the FV of the asset.

Answer 101

A1132. Has to be a guarantee by a the lessee or a third party RELATED, & should be capitalized at its PV.

Answer 102

A1133. When it's a capital lease meeting either first two lease classification criteria - transfer of ownership or BPO. *If not, amortize over lease term*

Answer 103

A1134. 1. TO Transfer of ownership at end of lease 2. BOP Barg Purchase Option 3. 75 75% of asset economic life is committed in lease term 4. 90 90% of leased property FMV is less or equal to PV of future lease payments

Answer 104

A1135. Present Value of lessor's Gross Investment in the lease. Equation Form: NIL = PV of (MLP + Unguaranteed Residual Value)

Answer 105

A1136. Sales Type Leases are, in substance, Sales of Assets on an installment basis. STL contain a manufacturer or dealers profit (or loss) at inception & interest inc. Direct Financing only interest income arises.

Answer 106

A1137. Yes *You pay at the end of the period*

Answer 107

A1138. Yes *Pay in beginning of period*

Answer 108

A1139. In an amount equal to the FV of the leased property at inception date or PV of the MLP's, whichever is lower. Debit: Leased Under Capital Assets Credit: Obligations Under Capital Leases

Answer 109

A1140. A lease that does not meet the 4 criteria of a capital lease. The leased property is not transferred from the books of the lessor to the lessee.

Answer 110

A1141. 1. The lease is a capital lease for the lessee 2. Collectability of the MLP is reasonably predictable. 3. No important uncertainties exist regarding the unreimbursable costs yet to be incurred by the lessor under the lease.

Answer 111

A1142. A specifically determinable amount payable at termination of the lease.

Answer 112

A1143. Equal to the PV of the MLP reduced by the cost of sales & by the initial direct costs. Equation Form: Profit = PV of MLP - (Cost of Sales + Initial Direct Costs)

Answer 113

A1144. It's equal to the PV of the lessor's minimum lease payments.

Answer 114

A1145. Costs incurred by the lessor that are directly associated with negotiating & consummating completed leasing transactions. Examples: commissions, legal fees, cost of preparing documents & the applicable portion of the compensation of employees directly involved with completed transactions.

Answer 115

A1146. A trans that involves the sale of property to a purchaser- lessor & a lease of the same property back to the seller- lessee.

Answer 116

A1147. Equal to the sum of Lessor's MLP & Unguaranteed Residual Value accruing to lessor.

Answer 117

A1148. BV (carrying amount) of asset leased out reduced by the PV of the unguaranteed residual value accruing to the lessor. Equation Form: Cost of Sales= BV - PV of unguaranteed residual value

Answer 118

A1149. Difference between the Gross Investment in the lease and the Net Investment in the Lease. It's a contra-asset and is amortized by the "interest method" over the lease term.

Answer 119

A1150. For capital leases: Gross amount of capital leases as of each B/S date & the PV of future MLP as of the date of the latest B/S in the aggregate and for each of the 5 succeeding years. For Operating leases greater than 1 year: disclose the future minimum rental payments required, in aggregate and for each of next 5 years & a general description of leasing arrangements.

Answer 120

A1151. Yes

Answer 121

A1152. It will be deferred & amortized in proportion to the amortization of the leased asset. For instance, in a capital lease where there is no ownership transfer and the asset is amortized in a straight-line manner, the deferred G or L will be amortized in a straight-line manner over the term of the lease. If ownership transfers then it will be amortized over the estimated life of the asset.

Answer 122

A1153. 1. Minor Portion Retained 2. Excess Gains 3. Economic Losses

Answer 123

A1154. The seller-lessee obtains financing for the use of the property & the purchaser-lessor (usually a financial institution or investor) obtains interest income.

Answer 124

A1155. A G or L on the sale of the asset will be deferred & amortized.

Answer 125

A1156. The G or L will be deferred & amortized in proportion to the related gross rentals charged to expense during the period. This usually will result in SL amortization. At the time of sale, a deferred gain should be reported as a deferred credit.

Answer 126

A1157. In the same manner as for other leases, that is, as if the property had been purchased from and leased to two separate parties.

Answer 127

A1158. Sales Type & Direct Financing Leases: The Lessor must disclose the net investment components, including the future MLP, unguaranteed residual value, unearned income & the future MLP to be received in each of the succeeding 5 years.

Answer 128

A1159. Disclose the cost & carrying amount, if different, of property leased or held for leasing, by major class & total AD; the minimum future rentals on noncancelable leases, in aggregate, & for each of the next 5 years; & a general description of leasing arrangements.

Answer 129

A1160. The noncancelable term of the lease plus the following 4 things: 1. All periods covered by bargain renewal options 2. All periods for which failure to renew the lease imposes a penalty on the lessee in an amount such as to make renewal reasonably assured. 3. All periods preceding the date that a BPO becomes exercisable. 4. All periods representing renewals or extensions of the lease term or lessors option.

Answer 130

A1161. Costs that are expenditures such as insurance, maintenance & taxes required to be paid on the assets economic life.

Answer 131

A1162. The lessee uses the incremental borrowing rate in computing the PV of the minimum lease payments. However if the implicit interest rate is lower than the lessees incremental borrowing rate, lessee will use implicit rate & discount the lease payments. *Implicit rate is lessor's rate*

Answer 132

A1163. 1. Minimum rental payments called for by the lease ov the lease term. 2. Any guarantees of a residual value of leased asset at the end of the lease. 3. Any penalty that the lessee may be required to pay upon failure to renew the lease. 4. For lessors, in addition to above, MLP also include any guarantee of the residual value. 5. MLP's do not include executory costs paid by either party, no do they include any contingent rentals.

Answer 133

A1164. Only the minimum rental payments over the lease term up to the date at which the BPO becomes exercisable & the payment called for by the BPO.

Answer 134

A1165. The estimated FV of the leased property at the end of the lease term.

Answer 135

A1166. Should be accounted for as an acquisition of an asset and the incurrence of a liability by the lessee, & as a sale or financing agreement by the lessor. All other leases should be accounted for as operating leases.

Answer 136

A1168. This component of net periodic pension cost reduces the pension cost for the period. It is based on the FV of plan assets at the beginning & end of the period, adjust for contributions & benefits paid.

Answer 137

A1169. The difference between the actual return on assets during the period & the expected return on assets for the period.

Answer 138

A1170. The value, as of a specified date, of an amount or series of amounts payable or receivable thereafter, with each amount adjusted to reflect 2 things. 1. The time value of money 2. The probability of payment between the specified date & the expected date of payment.

Answer 139

A1171. The process of assigning benefits or costs to periods of employee service.

Answer 140

A1172. The actuarial PV of benefits (whether vested or not) attributed by the pension benefit formula to employee services rendered before a specified date and based on employee services & compensation prior to that date.

Answer 141

A1173. Bonus Method Goodwill Method

Answer 142

A1174. Assets - FV Liabilities - PV's

Answer 143

A1175. 1. Management Expertise 2. Personal Business Reputation

Answer 144

A1176. Revised Uniform Partnership Act

Answer 145

A1177. The Par Value Method views the purchase & subsequent disposition as 2 different transactions. Acquisition of the shares is viewed as a constructive retirement of the stock. Treasury stock is recorded at PAR.

Answer 146

A1178. 1. If the acquisition cost of the TS is less than the price the stock was originally issued the difference is credited to APIC from TS. 2. If TS is more than the original, debit APIC from TS, ONLY to extent of any existing balance, excess is debited to RE. 3. The reissuance of TS under the Par Value Method is accounted for in the same manner as an org stock issuance. However, any reissuance of TS at less than par value, debit APIC - from TS until that balance is exhausted, debit RE for any excess.

Answer 147

A1179. 1. Compensatory 2. Noncompensatory

Answer 148

A1180. 1 The plan contains no options features except that employees may be permitted to enroll in the plan during a short period, no more than 31 days after purchase price has been established. 2 The discount rules (5%) 3 Substantially all full-time employees that meet limited employment qualifications may participate on an equitable basis.

Answer 149

A1181. The cost method views the purchase & subsequent disposition of stock as one transaction. 1. Reissued in Excess of Acquisition Cost - excess is credited to an appropriately titled PIC acct. 2. Reissued at less than acquisition cost - the deficit is 1st charged to any existing balance in the additional PIC from TS trans acct then remaining against RE. 3. B/S presentation - Presented on the B/S as an unallocated reduction of total stockholders equity (i.e.) contributed capital & RE.

Answer 150

A1182. A corp may decide to retire some or all of its TS. Retired stock is classified as authorized & unissued (like it never had been issued). Accounting for the retirement of TS depends on the method used initially to record it.

Answer 151

A1183. 1. Substantially all full-time employees may participate. 2. Stock is offered to employees equally or based on a uniform percentage of salary. 3. The time permitted for exercise is limited to a reasonable period. 4. The disc from market price of the stock is no greater than would be reasonable in an offer to stockholders or others.

Answer 152

A1184. D - dividends expected on stock E - exercise price V - volatility of the stock I - interest rate (risk free rate)for the expected term of the option L - life of the option S - stock current price

Answer 153

A1185. Dividends represent the distribution to stockholders of a proportionate share of RE or as in the case of a liquidating dividend, a return of capital. Dividends (except stock dividends) reduce stockholders equity through the distribution of assets or the incurrence of a liability.

Answer 154

A1186. At the date of declaration, property dividends are recorded at the FV of assets given up & any difference between FV & carrying amount of the asset is recorded as a G or L as a component of income from continuing operations.

Answer 155

A1187. Issuance by a corporation of it's own common shares to it's common shareholders in proportion to their existing holdings.

Answer 156

A1188. Treasury Stock is the corporations common or preferred stock that has been reacquired by purchase, by settlement of an obligation to the corporation, or through donation. Acquisition of treasury stock reduces assets & total stockholders equity (unless donated) while the reissuance of treasury stock increases assets & total stockholders equity.

Answer 157

A1189. Cost Method Par Value Method

Answer 158

A1190. They increase the number of shares outstanding & proportionally decreases the par or stated value of the stock. There is no change in the dollar amount of capital stock, additional PIC, RE or total stockholders equity.

Answer 159

A1191. Distributions in excess of retained earnings and, therefore, represent a return of investment rather than a share in profits.

Answer 160

A1192. 1. Declaration - date that the dividends are formally declared by the BOD & the declared dividends (except stock dividends) become a liability. 2. Record - the date of record is the date used to establish those stockholders who will receive the declared dividends. No JE is required unless the # of shares outstanding have changed from the date of declaration. 3. Payment - The distribution of assets is made on the date of payment.

Answer 161

A1193. Net income & Prior Period Adjustment

Answer 162

A1194. 1. Assets are revalued at NRV, but there is no net asset increase. (any loss on revaluation increases the deficit). 2. A minimum of the amount of the adjusted deficit must be available in PIC. This might be created by donation of stock from shareholders or reduction of the par value. 3. The deficit is charged against PIC and thus is eliminated.

Answer 163

A1195. 1. Gains from treasury stock transactions. 2. Gifts of property 3. Additions to owners equity attributable to reappraisals of property 4. Accumulated balance of OCI

Answer 164

A1196. 1. Dividends 2. Net Losses 3. Treasury Stock Transactions 4. Certain Stock Splits 5. Prior Period Adjustment 6. Certain special changes in accounting principle

Answer 165

A1197. A reorganization or revision of the capital structure. This procedure eliminates an accumulated deficit as if the company had been legally reorganized without much of the cost & difficulty of a legal reorganization. Thus, the corp will be able to pay dividends again.

Answer 166

A1198. The portion unavailable for dividends. Some reasons for appropriation are to create a reserve for plant expansion, to satisfy legal requirements of a bond indenture or to provide a cushion for expected future losses.

Answer 167

A1199. 1. Proportional Method - Allocation of the lump sum between the classes of stock in accordance with their relative FV's. 2. Incremental Method - Allocation of the lump sum based on the known FV of one security with the remainder of the lump sum being allocated to the other security.

Answer 168

A1200. Debit: Cash (number of shares x exercise price) Credit: Common Stock (shares x par/stated value) Credit: APIC (balance)

Answer 169

A1201. The assets are recorded at FV's current liabilities assumed generally are recorded at face amount & LT Liabilities at their V. The issued stock is recorded at par or stated value. Any excess of net assets acquired over par or stated value of the capital stock is credited to APIC.

Answer 170

A1202. The property received & the amount of contributed capital should be recorded at the FV of the property received or the market value of the stock, whichever is clearer. Assets (FV) Common Stock (Par/Stated) PIC - Common Stock (bal)

Answer 171

A1203. Cash (500 x $30) Common Stock (500 x $10) APIC - Comm Stock (bal)

Answer 172

A1204. No entry is required, just a memo entry. Common Stock & additional PIC increases when stock rights are exercised. RE is not affected when stock rights are exercised.

Answer 173

A1205. 1. Rights & Privileges of Securities Outstanding ex: dividend & liquidation preferences, participation rights, call prices & dates, conversion or exercise prices or rates & pertinent dates.

Answer 174

A1206. When a corporation sells two or more classes of stock for a lump sum, the proceeds are allocated among several classes of stock by one of two methods.

Answer 175

A1207. A contract to purchase one or more shares of stock in the future. Usually, shares of stock are not issued until the full subscription price is paid.

Answer 176

A1208. 1. Contributed capital which includes capital stock & APIC. 2. Retained Earnings 3. OCI

Answer 177

A1209. The portion of contributed capital required by statute to be retained in the business for protection of creditor's.

Answer 178

A1210. 1. Redeemable - Shareholders may redeem shares, at their option, at a specified price per share. 2. Convertible - may exchange for common stock. 3. Callable - Corp may purchase the preferred stock back to cancel it.

Answer 179

A1211. Represent privileges extended by corporations to acquire additional shares of capital stock under prescribed within a stated time period.

Answer 180

A1212. 1. Foreign Currency Items 2. Pension Adjustments 3. Unrealized G & L's on certain investments in debt securities & equity securities. 4. G & L's on certain hedging activities.

Answer 181

A1213. The injections of capital by stockholders. a. Cap Stock - the par or stated value of the stock purchased by owners b. APIC - PIC in excess of par or stated value

Answer 182

A1214. 1. Par Value - Stock with a specified par value per share printed on the certificate. 2. No-Par Value 3. No-Par with stated value

Answer 183

A1215. 1. Cumulative 2. Noncumulative 3. Fully Participating 4. Partially Participating 5. Non Participating

Answer 184

A1216. An enterprise that's in the development stage if "substantially all" of its efforts are devoted to establishing a new business & either principal operations have not begun or has begun & revenue produced is insignificant.

Answer 185

A1217. Compensation arrangements, expense allowances & similar items in the ordinary course of business

Answer 186

A1218. A deferral represents a transaction that has been reflected in the cash accts of the period but has not yet affected the determination of income for that period.

Answer 187

A1219. 1) Nature of the relationship (s) involved 2) a description of the trans, including trans to which no amounts or nominal amounts were ascribed, for each of the periods for which f/s are presented. 3) Dollar amounts of the trans 4) Amounts due from or to related parties as of B/S date.

Answer 188

A1220. 1. Sales, purchase & transfers of realty & personal property 2. Service received or furnished 3. Use of property & equip by lease or otherwise 4. Borrowings, lendings & guarantees 5. Intercompany billings based on allocations of common costs 6. Filings of consolidated tax returns

Answer 189

A1221. a) presenting consolidated f/s b) changing specific sub's that make up the group of for consolidated f/s. c) changing the entities included in combined f/s

Answer 190

A1222. A change that has the effect of adjusting the carrying amount of an existing asset or liabilities or altering the subsequent accounting for existing or future assets or liabilities.

Answer 191

A1223. Any changes to current or future cash flows of an entity that result from making a change in accounting principle that is applied retrospectively.

Answer 192

A1224. As adjustments to the beginning bal of R/E.

Answer 193

A1225. Those recognized changes in A or L's necessary to effect a change in accounting principle. An ex. is an adjustment to an inventory balance to effect a change in inventory valuation method.

Answer 194

A1226. Change in method of depreciation, amortization, or depletion for long-lived, nonfinancial assets.

Answer 195

A1227. 1) Change in an accounting prin. 2) Change in an accounting estimate. 3) Change in a reporting entity.

Answer 196

A1228. Current operating concept - normal recurring operations in evaluating the performance of the entity. All inclusive concept - F/S should include unusual & nonrecurring items in order to measure the long range operating performance of the enterprise. Method required now reflects a compromise between the two.

Answer 197

A1229. All changes in equity during a period except those resulting from investments by owners & distributions to owners.

Answer 198

A1230. If mat'l, presented net of related income tax after discontinued operations. Also, has to be BOTH unusual & infrequent of occurrence.

Answer 199

A1231. No!

Answer 200

A1232. Income from continuing operations includes G or L's from an asset that is classified as held for sale. If disposal will not occur for more than 12 months, costs to sell are discounted to PV.

Answer 201

A1233. Entities that have no items of other OCI in any period presented nor to not for profits!

Answer 202

A1234. SFAS 146 requires recognizing lease termination costs & specified employee severance plan costs related with exit or disposal activities in periods in which obligations to others exists, not necessarily in the period of commitment to a plan.

Answer 203

A1235. No!

Answer 204

A1236. As a separate component of income from continuing operations. Nature & financial effects should be disclosed. These items should NOT be reported net of income taxes.

Answer 205

A1237. Errors in F/S result from mathematical mistakes, mistakes in the application of accounting principles, or the oversight or misuse of facts that existed at the time the f/s were prepared.

Answer 206

A1238. The effects of the change in estimate on income before extra items, NI, & related per share amounts s/b disclosed in the period of the change or in future periods if the change affects those periods.

Answer 207

A1239. As a change in estimate.

Answer 208

A1240. An entity is required to display the accumulated balance of OCI separately from RE, Capital Stock & APIC.

Answer 209

A1241. By retrospectively applying the change to the f/s of all prior periods presented to reflect the financial info for the new reporting entity for the periods.

Answer 210

A1242. 1) Useful lives & salvage value of depreciable assets. 2) Recovery periods benefited by a deferred cost. 3) Expected losses on receivables. 4) Warranty costs.

Answer 211

A1243. 1) Nature & reason for the change & method of applying the change. 2) A description of prior period info that has been retrospectively adjusted, if any. 3) The effect of the change on income before extras, NI & the related per share amounts. 4) Cumulative effect of the change on RE or other components of equity or net assets.

Answer 212

A1244. Items that are included in the equity section as a separate component of owners equity.

Answer 213

A1245. 1) Parent co & it's sub's 2) Sub's of common parent 3) Enterprise & it's principal owners, management or members of immediate families 4) Affiliates

Answer 214

A1246. Errors that will "correct" themselves over 2 consecutive accounting periods.

Answer 215

A1247. SFAS 154 requires an entity to disclose as of the beginning of the earliest period presented that previously issued f/s have been restated along with a desc of the nature of the error, the effect of the correction on each f/s & the per share amounts effected, the cum effect of the change on RE & other components of equity of net assets. F/S of subsequent periods need not repeat the disclosures.

Answer 216

A1248. 1) Estimates based on unreasonable assumptions, ex. unrealistic depreciation rate 2) Recording erroneous amounts for assets & equities, ex. incorrect footing of inventory totals 3) Failure to record PPD & accrued expenses 4) The improper classification of assets as expenses and vice versa. 5) The change from an accounting prin that is NOT accepted to one that is, is viewed as a correction of an error.

Answer 217

A1249. By time of discovery or according to their effect on the B/S, I/S or both.

Answer 218

A1250. Errors that cause successive B/S amounts & NI to be incorrectly stated until the errors are discovered & corrected.

Answer 219

A1251. The cumulative effect of the error on periods prior to those presented shall be reflected in the carrying amount of A & L's as of the beginning of the first period presented. Any offsetting adjustment shall be made to the opening bal. of RE.

Answer 220

A1252. Should be reported as a prior period adjustment by restating the prior period f/s.

Answer 221

A1253. 1) Preferred Stock & Convertible Bonds ( if the market values the security primarily as a bond, it is monetary, if it values the security primarily as a stock, it is nonmonetary 2) Inventories used on contracts 3) Pension, sinking & other fund under an enterprises control

Answer 222

A1254. Value in use or market value 1) Value in use - used if immediate sale of the asset is not intended 2) current market value - used only if the asset is about to be sold

Answer 223

A1255. Depreciation, depletion & amortization expense on the basis of the AVERAGE current cost of the assets, service potential or lower recoverable amount during the period of use.

Answer 224

A1257. 1) Goods held primarily for resale or assets held primarily for direct use in providing services for the business 2) Claims to cash in amounts dependent on future prices of specific goods or services 3) Residual rights such as goodwill or equity interests

Answer 225

A1258. The current worth of the net amount of cash expected to be recoverable from the use or sale of an asset.

Answer 226

A1259. Average Current Cost Per Unit x Units Sold During The Year

Answer 227

A1260. 1. Holding monetary liabilities during a period of inflation. 2. Holding monetary assets during a period of deflation.

Answer 228

A1261. 1. Collectability of proceeds is doubtful 2. An investment is very speculative in nature 3. Where the final sale price is to be determined by future events

Answer 229

A1263. 1. There must be a relatively stable market for the product. 2. Marketing costs must be nominal. 3. The units must be homogeneous.

Answer 230

A1264. (Actual Cost / Estimated Total cost x Total Estimated Contract Income) less income previously recognized

Answer 231

A1265. Deferring & recognizing revenue in each year in proportion to the receivables collected during that year.

Answer 232

A1266. At PV of the payments discounted at the market interest rate

Answer 233

A1267. 1. It's the most conservative revenue recognition method. This method is used when the uncertainty of collection is so great that the use of the installment method is precluded. 2. All amounts collected are treated as a recoupment of the cost of the item sold until the entire cost associated with the trans. has been recovered. Only at this point is profit recognized.

Answer 234

A1268. 1. The sellers price to the buyer is substantially fixed or determinable at the date of sale. 2. The buyer has paid the seller, or the B is obligated to pay the s, & the obligation is not contingent on resale of the product. 3. The B's obligation to the S would not change in the event of theft, physical destruction, or damage of the product. 4. B has economic substance apart from S 5. S does not have significant obligation to help B resell it. 6. The amount of future returns can be reasonably estimated.

Answer 235

A1269. 1. Record the costs of construction 2. Record progress billings 3. Record collections 4. Recognize Revenue & GP 5. Record Completion of the contract

Answer 236

A1270. If it's probable continuing franchise fees will not cover the cost of the continuing services provided by the franchisor and also allow reasonable profit.

Answer 237

A1271. 1. The franchisor has no remaining obligation or intent to refund any cash received or forgive any unpaid notes or receivables. 2. Substantially all initial services of the franchisor required by the agreement have been performed 3. No other mat'l conditions or obligations related to the determination of substantial performance exist.

Answer 238

A1272. Yes

Answer 239

A1273. Contra Account to Construction in Progress

Answer 240

A1274. Only when revenue is collectible over an extended period and no reasonable basis exists for estimating collectability.

Answer 241

A1275. Money or a claim to receive money, the amount of which is fixed or determinable without reference to future prices of specific goods or services.

Answer 242

A1276. At the time of the sale at the sales price. Commission paid to the consignee is reported as a selling expense NOT netted against sales revenue.

Answer 243

A1277. A DTL or DTA is recognized for the differences between the assigned values and the tax bases of the assets & liabilities recognized in a business purchase combo.

Answer 244

A1278. No! Basis for income recognition on cost method investments is dividends received for both financial & tax purposes.

Answer 245

A1279. An equity methods undistributed income. The tax effect of this temporary difference depends on whether the investor ultimately expects to receive the undistributed income as dividends or as a realized gain upon disposal of the investment. If dividends, computation of temporary difference should allow for dividend rec deduction.

Answer 246

A1280. An event recognized in the f/s that does not have a tax consequence under the regular U.S. tax system. Certain revenues are exempt from taxation & certain expenses are not deductible.

Answer 247

A1281. 1. Expenses incurred in generating tax-exempt income. 2. Premiums paid for life ins. on officers when the enterprise is the beneficiary. 3. Fines, penalties & other costs incurred from activities that are a violation of the law.

Answer 248

A1282. They are separately computed for each tax jurisdiction (i.e., fed, state, local or foreign) because the tax attributes related to one tax authority cannot be used to directly offset tax attributes related to a different taxing authority.

Answer 249

A1283. 1. Prepaid Expense 2. Depreciation Expense These situations will result in future taxable amounts!

Answer 250

A1284. A LT-Contract that is accounted for by the % of completion method for financial reporting & the completed contract method for tax purposes. The temporary difference is deferred income for tax purposes that becomes taxable when the contract is completed.

Answer 251

A1285. 1. Interest earned on state & municipal obligations. 2. Life ins proceeds received by an enterprise on one of it's officers. 3. Dividends received by one US corp from another that are excluded from taxable income due to the dividends received deduction.

Answer 252

A1286. The change during the year in an enterprise's deferred tax liabilities & assets.

Answer 253

A1287. Reduce deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not (more than 50%) that some or all of the DTA will not be realized. The allowance must reduce the DTA to an amount that is more likely than not to be realized.

Answer 254

A1288. When a loss situation results in a tax refund or tax savings.

Answer 255

A1289. Income taxes currently payable (refundable) is also called current tax expense (or benefit) & is determined by applying the provisions of the tax law to the taxable income or taxable loss for period. ex. taxable income x tax rate / income taxes currently payable

Answer 256

A1290. Pretax accounting income, book income, financial income, accounting income, or income for financial accounting purposes.

Answer 257

A1291. Operating loss before income taxes (XXX) + Benefits of loss carryback xxx + Benefits of loss carryforward xxx ---- Net Loss (XXX)

Answer 258

A1292. For FINANCIAL: Revenues Earned - Expenses incurred = Pretax Financial income (loss) - Income Tax Expense (benefit) = NI (Loss) for TAXABLE: Taxable Amounts - deductible amounts = taxable income (loss)

Answer 259

A1293. ITE (benefit)is the sum of the current tax expense (benefit) and deferred tax expense (benefit). In the rare instances where taxable income is the same amount as pretax financial inc, total income tax expense will equal income taxes currently payable.

Answer 260

A1294. 1st Entry For years going back Debit: Income Tax Refund Received Credit: Benefits of Loss Carryback 2nd Entry (to record carryforward) Debit: Deferred Tax Asset Credit: Benefits of Loss Carryforward

Answer 261

A1295. Depends on whether the benefits of the NOL Carryforward are expected to be realized in the following year or in a later year.

Answer 262

A1296. (6 Parts) Pretax fin income (loss) XXX + excess of taxable rev's over rev's per books XXX - excess of deductible amounts over expenses per books (XXX) - excess rev's per books over taxable rev's (XXX) + excess of expenses per books over ded expenses XXX --- Taxable income (loss) XXX

Answer 263

A1297. Income Tax Expense - Current Income Tax Expense - Def (this was benefits of loss carryforward) Income Taxes Payable DTA

Answer 264

A1298. Temporary difference's that will result in taxable amounts in future years when the related assets are recovered.

Answer 265

A1299. When they are realized.

Answer 266

A1300. Income before income taxes XXX Current tax expense XXX Deferred tax expense XXX Total Income Tax Expense XXX NI XXX

Answer 267

A1301. Difference between (1) the amount of taxable income & pretax financial income for a year & (2)the tax bases of A & L's & their reported amounts in f/s as temporary differences.

Answer 268

A1302. It's the difference between the tax basis of an asset or liabilities & it's reported amount in the f/s that will result in taxable or deductible amounts in future years when the reported amount of the asset is recovered or the liabilities is settled.

Answer 269

A1303. Temporary difference's that will result in deductible amounts in future years when related liabilities are settled.

Answer 270

A1304. 1. If taxable income is expected in the year that a future taxable or deductible amount is scheduled, use the enacted tax rate for that future year to calculate the related DTA or DTL. 2. IF NOL is expected, use the enacted rate of what will be the prior year the NOL will be carried back to or the enacted rate of the future year to which the carryforward will apply.

Answer 271

A1305. In some cases, there are actions (including elections for tax purposes) that 1) are prudent & feasible 2) an enterprise ordinarily might not take, but would take to prevent an operating loss or tax credit carryforward from expiring unused 3) would result in realization of deferred tax assets.

Answer 272

A1306. They are separated & reported in a net current & a net noncurrent amount.

Answer 273

A1307. 1. Contracts or backlog that will produce more than enough taxable income to realize the DTA based on existing sales prices & cost structures 2. An excess of appreciated asset value over the tax basis of the entity's net assets in an amount sufficient to realize the DTA. 3. A strong earnings history & any loss isn't an indication of a continuing condition.

Answer 274

A1308. 1. Cumulative losses in recent years 2. History of operating loss or tax credit carryforwards expiring unused 3. Losses expected in early future years (by a presently profitable entity) 4. Unsettled circumstances that, if unfavorably resolved, would adversely affect future operations & profit levels on a continuing basis in the future. 5. A carryback, carryforward period that is so brief that it would limit realization of tax benefits.

Answer 275

A1309. It ultimately depends on the existence of sufficient taxable income of the appropriate character (ex. ordinary inc. or capital gain) within the carryback, carryforward period available under the tax law.

Answer 276

A1310. An enterprise must use judgment in considering the relative impact of negative & positive evidence. The more negative evidence that exists the more positive evidence is necessary & the more difficult it is to support a conclusion that a valuation allowance is not needed for some portion or all of the DTA.

Answer 277

A1311. It's included in income from continuing operations.

Answer 278

A1312. Yes! The amounts & expiration dates of operating loss & tax credit carryforwards.

Answer 279

A1313. If a valuation allowance is recognized for the DTA for an acquired entity's deductible temporary difference's or operating loss or tax credit carryforwards apply them to: 1. First to reduce to zero any GW related to the acquisition. 2. Reduce to zero other noncurrent intangible assets related to the acquisition. 3. Reduce the income tax expense

Answer 280

A1314. Tax law has generally allowed corporate shareholders owning less than 20% of the stock of a qualifying domestic corp to deduct 70% of the dividends received & 80% for owning 20-80%.

Answer 281

A1315. They are classified as current or noncurrent based on the classification of the related asset or liability for financial reporting. A DTA or DTL that is not related to an asset or liabilities for financial reporting, including DTA's related to carryforwards, is classified according to the expected reversal date of the temporary difference.

Answer 282

A1316. 1. Adjustment of the opening bal or RE for certain changes in accounting principles or a correction of an error. 2. G & L's recognized in comprehensive inc., but excluded from net inc. 3. An increase or decrease in contributed capital 4. Expenses for employee stock options recognized differently for financial reporting & tax purposes

Answer 283

A1317. 1. Current Tax Expense (benefit) 2. Deferred tax expense (benefit) 3. Investment tax credits 4. Government grants 5. The benefits of operating loss 6. Tax expense that results from allocating certain tax benefits. 7. Adjustment of a DTA or DTL or a change in tax status of an enterprise. 8. Adjustment of the valtion allow

Answer 284

A1318. The amount allocated to continuing operations is the tax effect of the pretax income or loss from continuing operations that occurred during the year, + or - income tax effects of: 1. Changes in judgment about the realization of DTA's in future years 2. Changes in tax laws or rates 3. Changes in tax status The remainder is allocated to items other than continuing operations.

Answer 285

A1319. Income tax expense (benefit) for the year is to be allocated among continuing operations, disc operations, extra items & items of OCI. The process of allocating inc. taxes to key components of the f/s is called intraperiod tax allocation.

Answer 286

A1320. 1. Total of all DTL's 2. Total of all DTA's 3. Total valuation allowance recognized for DTA's 4. Net change during the year in total valuation allowance 5. Approximate tax effect of each type of temporary difference & carryforward

Answer 287

A1321. If there is only 1 item other than cont operations, the portion of income tax expense (benefit) for the year that remains after the allocation to continuing operations is allocated to that item. If there are 2 or more items other than continuing operations, the amount that remains after the allocation to continuing operations shall be allocated among those other items in proportion to their individual effects on income tax expense (benefit) for the year.

Answer 288

A1322. A public enterprise discloses a reconciliation using percentages or dollar amounts of a reported amount of income tax expense attributable to continuing operations for the year to an amount of income tax expense that would result from applying domestic federal statutory tax rates to pretax income from continuing operations.

Answer 289

A1323. Yes

Answer 290

A1324. COGS + income in inv + decrease in a/p

Answer 291

A1325. Sales + Beginning A/R - Ending A/R. sometimes take out write offs

Answer 292

A1326. 1. Converting debt to equity 2. Acquiring assets by assuming directly related liabilities, such as a purchase of a bldg by incurring a mortgage. 3. Obtaining an asset by entering into a capital lease 4. Exchanging non-cash assets or liabilities for other non- cash assets or liabilities.

Answer 293

A1327. Yes

Answer 294

A1328. Under this method, enterprises are encouraged to report major classes of gross cash receipts & gross cash payments & their arithmetic sum-the net cash flow from operating activities. At a minimum the following classes of operating cash receipts & payments should be reported separately for: cash from cust, interest & dividends received, other operating cash receipts, cash paid to employees & other suppliers of goods or services including ins & ppd's, interest paid, income taxes paid & other operating cash payments

Answer 295

A1329. 1. Entities ability to generate positive future net cash flows. 2. Entities ability to meet its obligations, it's ability to pay dividends, and its needs for external financing. 3. The reasons for differences between NI & associated cash receipts & payments. 4. The effects on an enterprises financial position of both it's cash & non-cash investing & financing transactions during the period.

Answer 296

A1330. Related disclosures should report the effects of investing & financing transactions that affect an enterprises financial position, but do not directly affect cash flows during the period.

Answer 297

A1331. ST, highly liquid investments that are both 1) readily convertible into known amounts of cash, 2) so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Maturity less than 3 months!!

Answer 298

A1332. 1) All deferrals of past operating cash receipts & payments, such as changes during the period in inventory & deferred income. 2) All accruals of expected operating cash receipts & payments, such as changes during the period in receivables & payables. 3) Items whose cash affects are investing CF's, such as depreciation & G & L's on sales of PPE & discontinued operations. 4) Items whose cash affects are financing cash flows, such as G&L's on extinguishment of debt.

Answer 299

A1334. 1) Net cash flow from operating activities-DM or IM 2) Net cash flow from investing activities 3) Net cash flow from financing activities 4) Net increase (decrease) in cash & cash equivalents 5) Cash & cash equivalents at beginning of year 6) Cash & cash equivalents at end of year

Answer 300

A1336. Investing Activities

Answer 301

A1337. Financing Activities

Answer 302

A1338. If the direct method was used for operating activities.

Answer 303

A1339. 1) Acquiring and disposing of PPE & other productive assets. 2) Purchases, sales & maturities of debt & equity securities (excluding those acquired specifically for resale). Those include AFS & HTM & investments in equity securities.

Answer 304

A1340. Investing

Answer 305

A1341. 1) obtaining resources from owners & providing them with a return on, & return of, their investment. 2) Borrowing money & repaying amounts borrowed, or otherwise settling the obligation. 3) obtaining & paying for other resources obtained from creditors on long-term credit. 4) derivatives that contain a financing component

Answer 306

A1342. Cash outflows: cash payments for: 1) to acquire materials for providing services & manufacturing goods for resale, including prin payments on A/P & both s & LT N/P to suppliers. 2) to other suppliers for other goods or service, including employees 3) for grants to other governments or organizations for specific activities that are considered to be operating activities of the grantor government 4) for taxes, duties, fines & other fees or penalties 5) for quasi-external operating trans with other funds, including payments in lieu of taxes

Answer 307

A1343. Includes acquiring & disposing of capital assets used in providing services or producing goods; borrowing money for acquiring, constructing, or improving capital assets & repaying the amounts borrowed, including interest, & paying for capital assets obtained from vendors on credit.

Answer 308

A1344. After F/S 1. Budgetary Comparison Schedule (BCS) 2. Infrastructure Schedules

Answer 309

A1345. 1. Intro 2. Financial a. MD&A b. Basic F/s 1. GWS - net assets & activities 2. Fund F/S 3. Notes to F/S c. RSI d. Combining Statements e. Individual Fund Statements & Schedules

Answer 310

A1346. Making & collecting loans (except program loans) & acquiring & disposing of debt or equity instruments.

Answer 311

A1347. Includes borrowing for purposes other than to acquire, construct or improve cap assets, as well as repaying borrowed amounts, including interest. This category includes proceeds from all borrowings (such as revenue anticipation notes) not clearly attributable to capital assets, regardless of the form of the borrowing.

Answer 312

A1348. Cash Inflows: Receipts of cash from 1) Sales of goods/service, including receipts from collection or A/R & both S & LT Notes Received from customers arising from sales. 2) Quasi-external operating trans with other funds 3) Grants for specific activities that are considered to be operating activities of the grantor government. (A grant arrangement of this type is essentially the same as a contract for services) 4) Other funds for reimbursement of operating trans 5) Loan programs that are made & collected as part of a governmental program. ex. student loans

Answer 313

A1349. Cash inflows, receipts, & payments that do not result from transactions defined as capital & related financing, non- cap financing, or investing activities.

Answer 314

A1350. Same as Proprietary as far as economic resource measurement focus & the accrual basis of accounting. Required statements are: 1) State of N/A 2) State of changes in N/A *Major fund recording is NOT used in Fiduciary Funds*

Answer 315

A1351. F/S should be prepared using the economic resources measurement focus & the accrual basis of accounting. Internal service funds also should be reported in the aggregate in a separate column on the proprietary fund statements.

Answer 316

A1352. A reconciliation to convert the governmental funds to the economic resources measurement & accrual basis of accounting. Adjustment usually include moving the trans. for general capital assets & general LT liabilities from the operating statements to the B/S. Other reconciling items may include adjustment to deferred revenues or internal service fund net assets.

Answer 317

A1353. 4 categories: Operating, Non-Cap Financing, Cap & Related Financing, Investing Activities

Answer 318

A1354. a) statement of net assets or b/s - net assets should be reported in the same categories required for the GWS. b) statement of rev's, expenses & changes in fund net assets

Answer 319

A1355. General fund is ALWAYS major! 2 other criteria are: 1) At least 10% of the corresponding total for the relevant fund category (governmental or proprietary) 2) At least 5% of the corresponding total for all governmental & proprietary funds combined.

Answer 320

A1356. 1) Balance Sheet 2) Statement of Revenues, Expenditures, and changes in fund balance.

Answer 321

A1357. Amounts from enterprise funds & exceptional internal service funds.

Answer 322

A1358. a) Amounts are presented within the appropriate governmental activities, bus-type activities, & component unit classification. b) Depreciation is not required if other criteria is met.

Answer 323

A1359. 1) Government manages the eligible infrastructure assets using an asset management system. Such as up to date inventory, perform condition assessments, estimate each year of maintenance & preserve. 2) Government documents that the eligible infrastructure assets are being preserved approximately at (or above) a condition level established & disclosed by the government.

Answer 324

A1360. Works of arts, historical treasures. If collection is exhaustible it should be depreciated over it's useful life.

Answer 325

A1361. If both: a) the decline in service utility of the capital asset is large in magnitude b) the event or change in circumstance is outsie the normal life cycle of the cap asset.

Answer 326

A1362. Retroactive reporting is required 4 years after the effective date on the basic provisions for all major general infrastructure assets that were acquired or significantly reconstructed, or that received significant improvements, in fiscal years ending after 6/30/80.

Answer 327

A1363. Includes the amounts from the governmental funds (restated on the accrual basis of accounting) plus, typically the amounts from the internal service funds. Exception applies if the internal service fund provides services primarily to enterprise funds.

Answer 328

A1364. 1) Discussion 2) Comparison 3) Analysis of Overall Financial Position 4) Analysis of Balances & transactions of individual funds 5) Analysis of significant budget changes 6) Capital asset & LT Liabilities activities 7) Infrastructure 8) Currently known facts, decisions or conditions

Answer 329

A1365. Eliminations deduct the duplication resulting from interfund transfers & internal service fund transactions. Interfund rec's and payables are eliminated, except for residual balances between governmental & bus-type activities. Internal events that are essentially allocations or OH expenses are also eliminated from the statement of activities. Interfund services provided & used between functional categories, such as sales of utilities, are not eliminated.

Answer 330

A1366. Special & extra items are nonoperating sources or uses. They are displayed separately on the statement of activities after the calculation of excess revenues. Special items are within the control of management but are both abnormally big in size & either unusual in nature or infrequent in occurrence. Extra items are trans or other events that are both unusual in nature and infrequent in occurrence.

Answer 331

A1367. The fiduciary fund category includes only those funds used to report assts held in a trustee or agency capacity for others & that cannot be used to support the governments own programs. Private-purpose trust funds & permanent funds distinguish between resources held in a fiduciary capacity & those available to the government. Private purpose trusts are fiduciary funds, permanent funds are governmental funds, NOT fiduciary funds!!

Answer 332

A1368. Sum of the governmental & business-type activities.

Answer 333

A1369. GASB don't require it, but it's for governments that participate in the GFOA certificate of achievement for excellence in financial reporting. Sort of reflects GASB requirements for MD&A.

Answer 334

A1370. Enterprise & internal service funds! If the sponsoring government is the predominant "customer" for the activity, the activities are reported in an internal service fund. Otherwise an enterprise fund is used.

Answer 335

A1371. Fund statements appear between the GWS & the notes. The combining statements report funds by type for the fiduciary funds & the combo of nonmajor funds. 1) A reconciliation to GWS appears on the face of the governmental fund financial statements, in a separate schedule, or in the notes. 2) Cash flows statements appear only in the fund statements for proprietary funds! 3) Optional combining fund statements (for nonmajor funds) may be presented after the notes to the f/s.

Answer 336

A1372. Basic F/S include both GWS & the fund statements, as well as the notes.

Answer 337

A1373. In GWS for all amounts. Also, in Prop fund statements, where rev's & expenses are recorded & NI (loss) is reported. Also used in fiduciary fund statements, except for the recognition of certain liabilities of defined benefit pension plans & certain postemployment healthcare plans.

Answer 338

A1374. No!! It's a reservation of fund balance similar to the appropriated RE of a business enterprise.

Answer 339

A1375. The encumbrance system is used in governmental funds (general, spec rev, & cap projects) to prevent over- expenditure & to show compliance with legal requirements. When a PO is issued or a contract is approved, the estimated amount of the planned expenditure is encumbered (committed) by debiting Encumbrances & crediting Reserve for Encumbrances. When the related invoice is received, the encumbrance entry is reversed and the actual expenditure is recorded.

Answer 340

A1376. All amounts in the GWS, including from the governmental funds, are determined using the economic resources measurement focus and accrual basis of accounting! Governmental funds presented in the fund F/S use current financial resources and modified accrual basis. Prop & Fiduciary funds use the economic resources focus & accrual basis in the fund statements, with limited exceptions for some fiduciary funds.

Answer 341

A1377. Close the encumbrances acct by debiting fund balance & crediting encumbrances. This reduces the unreserved fund balance acct & causes the reserve for encumbrances acct - which merely offsets the encumbrances acct during the year - to be the true fund balance reserve. *At beginning of the next period reverse the closing entry*

Answer 342

A1378. 1) Revenues - accrued when available & measurable 2) Fixed assets are expenditures *Modified accrual is used in the government-type fund statements (general, spec rev, cap projects & debt service funds)

Answer 343

A1379. The four required columns are: governmental activities, bus-type activities, the primary government (sum of the previous two), & component units. Note **Funds do not explicitly appear in GWS, the amounts in governmental fund, prop fund and component units statements match or are reconciled to GWS amounts.

Answer 344

A1380. Only 1 general fund & none, one or more of the other types of funds.

Answer 345

A1381. NO!

Answer 346

A1382. Pension Trust Funds, Investment Trust Funds, Private- purpose trust funds & Agency Funds (which are purely custodial A = L)

Answer 347

A1383. 1. Enterprise (ex. Utilities) 2. Internal Service Funds (ex. central repair shop)

Answer 348

A1384. NO!!!!

Answer 349

A1385. A specific governmental unit is not accounted for through a single accounting entity. Instead, the accounts of a government are divided into several funds. A fund is a fiscal & accounting entity with a self-balancing set of accounts recording cash & other financial resources, together with all related liabilities & residual equities & balances, & changes therein, that are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations.

Answer 350

A1386. Fiduciary funds acct for resources ($ related liabilities) held by governments in a trustee capacity (trust funds) or as an agent for others (agency funds).

Answer 351

A1387. They are used to finance a governments self-supporting business-type activities (ex. utilities). The accounting equation is the same as a business corp! Prop fund operations are measured in terms of revenues earned, expenses incurred & Net Income or loss.

Answer 352

A1388. When some of the assets of a governmental fund are not working capital available for expenditure-e.g., assets of one fund have been loaned to another fund for several years - a fund bal. reserve is established.

Answer 353

A1389. General, SRF, CPF, DSF & Permanent Fund

Answer 354

A1390. Additions to fund assets or decreases in fund liabilities (except from other financing sources).

Answer 355

A1391. Forecasts of ($ authorizations of ) asset outflows of estimated uses of fund working capital (except for other financing uses). The appropriations control account is credited to record the budgeted expenditures (and closed at end of period with a debit).

Answer 356

A1392. Increases in fund liabilities or decreases in fund assets (except for other financing uses).

Answer 357

A1393. Forecasts of asset inflows of estimated sources of fund working capital (except from other financing sources). The estimate revenues control acct is debited to record the revenue budget ($ is closed at the end of the period with a credit).

Answer 358

A1394. The fund residual equity acct that balances the A & L accts of a governmental fund, thus recording the amount available for expenditures. (The Fund Bal. Acct. is similar to OE of a common enterprise only in this balancing feature; however, it does not purport to show any ownership in a fund's assets).

Answer 359

A1395. To finance the cops, fire protection, courts, inspection & general admin.

Answer 360

A1396. These are trans that would result in recognizing revenues & expenditures or expenses, as appropriate, if they were with organizations apart from the government. These transactions should also result in recognition of rev's & expend's or exp's as appropriate, when they occur between or among funds of the government. Examples: routine employer contributions to pension trust funds

Answer 361

A1397. Interfund transactions simultaneously affect two or more funds of the government. Transfers are NONRECIPROCAL shifts of resources among funds and are NOT intended to be repaid.

Answer 362

A1398. An agency fund is used to account for the custodial activities of a government serving as an agent for other government, private organizations or individuals. Agency funds are purely custodial (A=L). No equity in agency funds, no operating accts (ex. revenue) and no operating statement!

Answer 363

A1399. 1) A & L's of subfunds are accounted for by using separate A & L accts. ex. cash-construction, Investments-debt service 2) Rev's & expenses related to the subfunds are recorded as enterprise rev's & exp's, not in a separate subfund rev & expense accts. 3) Customers' security deposits that can't be spent for normal operating things should be classified in the b/s of the enterprise funds as both a restricted asset and a liability.

Answer 364

A1400. They are used to account for a governments business-type operations that are financed & operated like private business, where the intent is that all costs (including depreciation) of providing goods & services to the general public be recovered primarily through user charges. ex. electricity, gas, water & sewage systems

Answer 365

A1401. Has to do with enterprise funds. If capital, debt service, trust, or agency funds related to an enterprise activity are required (ex. bond indentures, other contractual agreements, grant provisions, or laws), they are accounted for as enterprise fund subfunds rather than as separate funds.

Answer 366

A1402. Pension Trust Funds, Investment Trust Funds, Private- Purpose Trust Funds & Agency Funds

Answer 367

A1403. 1) Pension trust funds are needed only by governments that manage their own pension plans rather than participate in statewide plans or contract with a company to do it. 2) Accounting is basically the SAME as Proprietary Funds. Contributions & earnings are revenues, and benefit payments, admin costs & refunds or contributions are expenses. Depreciation expense is also recorded!!

Answer 368

A1404. The most common type of agency fund is the tax agency fund-used when one government collects property (or other) taxes for several governments, usually including the collecting government. Also, some governments use a payroll withholding agency fund to accumulate the payroll taxes, insurance premiums, etc. withheld in its several funds, then remit them to the proper governments, insurance companies, etc.

Answer 369

A1405. No!! Both are labeled Net Assets!!

Answer 370

A1406. They are supposed to break even annually and/or over a period of years! That is, the charges to other departments- that are accounted for as ISF revenues - are intended to recoup ISF expenses.

Answer 371

A1407. 1) Only the FA that are expected to be replaced through the ISF are recorded therein & depreciated. ex., the printing equipment for a central printing shop located in the basement of a county house would be recorded in (& depreciated in) the print shop ISF. The house is reported in the government-wide f/s, a portion of the house cost would NOT be recorded in the ISF. 2) An account such as Billings to Depts serves as the ISF sales account rather than the usual revenues acct.

Answer 372

A1408. They are used to account for nonexpendable resources that may be used for the governments programs, in other words, to benefit the reporting entity or its citizens. They use modified accrual but their are no budgetary & encumbrance entries.

Answer 373

A1409. Current Assets + Fixed & Other Assets = Current Liabilities + LT Debt + Net Assets

Answer 374

A1410. Difference should be deferred & amortized as a component of interest expense over the remaining life of the old debt or the life of the new debt, whichever is SHORTERS! Reported on B/S as either an addition or deduction from the new debt liabilities. This is in Proprietary funds!

Answer 375

A1411. They are used to account for in-house business enterprise activities. Examples are government motor pools, central repair shops & garages, data processing departs & photocopy & printing shops.

Answer 376

A1412. The initial capital to finance an ISF may come from the general fund, the issuance of general obligation bonds, transfers from other funds, or advances from other governments. Permanent capital contributions (i.e., residual equity transfers) must be distinguished from loans & advances that are to be repaid.

Answer 377

A1413. The deciding factor for use of a SRF instead of an enterprise fund is intent. If the intent is to recover less than 50% of expenses from user fees, then the activity is handled in a special revenue fund. Another deciding factor in using a SRF as opposed to a private purpose trust fund are the beneficiaries. If the bene's are citizens or the reporting entity, the activity is handled in a SRF. If the bene's are individuals, private organizations, or other governments, then the activity is handled in a private- purpose trust fund.

Answer 378

A1414. Uses modified accrual, budgetary, encumbrance & actual activity usually appear in SRF's. Kind of MIMICS the General Fund!

Answer 379

A1415. It's used to account for the acquisition & use of financial resources to construct or otherwise acquire major long- lived general government capital facilities. Accounting similar to General & SRF's except budgets are optional.

Answer 380

A1416. Often needed during the early stages of the capital projects to pay for expenditures incurred before the bond issue proceeds or other resources are received.

Answer 381

A1417. 1. To record endowment earnings that are restricted for library purposes: Debit: Cash or Due from Perm Fund Credit: OFS Library Perm Fund 2. To record expenditures for library purposes: Debit: Expenditures-Lib Books Credit: Cash or payable 3. To close the accts at year-end: Debit: OFS Lib Perm Fund Credit: Expenditures Lib Books Credit: Fund Balance

Answer 382

A1418. Source Use Hotel Bed Tax - Operate Tour Ctr Gas Tax - Maintain Streets Parking Fines - Run Traffic Crt Library Fines - Operate Library Donations - Purchase Library Books

Answer 383

A1419. Typically are provided by bond issue proceeds, other funds, & interest earnings. 1) Interfund transfers are classified as operating transfers (OFS) or residual equity transfers, as appropriate. 2) Bond issue proceeds are classified as OFS. Premium & Disc are recorded as OFS or OFU. Debt issue cost paid out of proceeds are expenditures. A net premium is usually transferred to the DSF.

Answer 384

A1420. It's used to account for the accumulation of resources for the periodic payment of interest on and principal of general obligation LT-Debt. Uses modified accrual & similar accounts & entries to general, SRF & CPF's!

Answer 385

A1421. No! Depreciation expense is also NOT recorded in governmental-type funds! LT Debt are also NOT carried in governmental-type funds!

Answer 386

A1422. Debit: Supplies Inv Credit: Fund Bal Debit: Fund Bal Credit: Fund Bal Reserved for Supplies Inventory

Answer 387

A1423. Debit: OFU Credit: Cash (or payable)

Answer 388

A1424. Used to account for revenues that are externally restricted or designated by the legislative body for specific general government purposes other than capital projects.

Answer 389

A1425. No! Transfers in/out or to/from are not netted!!

Answer 390

A1426. Debit: Encumbrances Control Credit: Reserve for Encumbrances

Answer 391

A1427. Debit: Cash (or receivable) Credit: Grant Revenues Credit: OFS: Bond Proceeds

Answer 392

A1428. Revenues Control (actual) OFS (actual) Expenditures (actual) OFU (actual) Fund Bal (diff-debit or credit) Fund Balance Encumbrance Control (amount outstanding at year end) **reverse this at beginning of following year**

Answer 393

A1429. Estimate Rev Control Estimate OFS Budgetary Fund Bal Estimate OFU Appropriations

Answer 394

A1430. Revenues are recorded as received in cash except for revenues susceptible to accrual and revenues of a material amount that have not been received at the normal time of receipt. Revenues are considered susceptible to accrual at the time they become measurable & available for use.

Answer 395

A1431. Restricted grants should not be recognized as revenue until they are earned. A restricted grant must be expended for the specific purposes to be considered earned. Deferred grant revenue is recorded initially, and the grant revenue is recognized only when the qualifying expenditures are incurred.

Answer 396

A1432. YES!!

Answer 397

A1433. Encumbrance accounting records obligations to spend (PO's) to prevent overspending of appropriations. Encumbrances are NOT liabilities. 1) Encumbrance entry is made when an item is ordered in the amount of the estimated cost. 2) A reverse entry is made for the same dollar amount when the invoice arrives. 3) Outstanding encumbrances at year end are carried forward as a reserve of fund bal with a corresponding deduction of unreserved fund bal. 4) The spending of a prior year outstanding encumbrance is a use of res fund bal, not a current year expenditure.

Answer 398

A1434. Billed available means collected or collectible within the current period or early enough the next period (within 60 days or so) to be used to pay for expenditures incurred in the current period (ex. property taxes). If revenue-related assets (e.g. taxes receivable) are not available, a deferred revenue acct. should be credited initially. When the assets become available, the acct is debited & revenue is credited.

Answer 399

A1435. 1) Inventory items may be recorded as expenditures either at the time of purchase or at the time the items are used. 2) Expenditures normally are NOT allocated between years by the recording of prepaids (ex. 2year ins. policy). PPD expenses may be recorded as expenditures or may be allocated to periods (in funds using accrual accounting) 3) Interest on general LT debt, usually accounted for in DSF's, normally are recorded as an expenditure on it's due date rather than being accrued prior to it's due date.

Answer 400

A1436. A system of providing quantitative information primarily financial in nature about economic entities that is intended to be useful in making economic decisions.

Answer 401

A1437. Balance Sheet, The income statement, statement of cash flows

Answer 402

A1438. Lenders, investors, company management, suppliers, customers, employees, competitors, government agencies, politicians and the press

Answer 403

A1439. The FASB

Answer 404

A1440. Rapid advance in information technology, the international integration of worldwide business and the increased scrutiny associated with large corporate accounting scandals.

Answer 405

A1441. The preservation of a systematic, quantitative record of an activity

Answer 406

A1442. 1) to handle routing book keeping tasks 2) to structure the information so it can be used to evaluate the performance and status of the business

Answer 407

A1443. Financial accounting provides information to outside users. Managerial accounting provides information for internal users.

Answer 408

A1444. The Balance Sheet

Answer 409

A1445. The Income Statement - The income statement represents the accountant's best effort at measuring the economic performance of a company.

Answer 410

A1446. The Statement of cash flows.

Answer 411

A1447. Operating, investing and financing

Answer 412

A1448. Financial Accounting Standards Board

Answer 413

A1449. Generally accepted accounting principles.

Answer 414

A1450. SEC - Securities and Exchange Commission

Answer 415

A1451. IASB - International Accounting Standards Board

Answer 416

A1452. False.

Answer 417

A1453. Assets

Answer 418

A1454. Liabilities

Answer 419

A1455. Owner's equity

Answer 420

A1456. Statement of cash flows - All of a company's cash transactions are categorizes as operating, investing or financing activities

Answer 421

A1457. The notes to the financial statements. Notes are an integral part of the financial statements.

Answer 422

A1458. It increases the reliability that users can place on the information in the company's financial statements.

Answer 423

A1459. Relevance vs. reliability. Other concepts include: comparability, conservatism, materiality, and articulation

Answer 424

A1460. The balance sheet shows what a company owns and what it owes.

Answer 425

A1461. The accountants best attempt at measuring the economic performance of a company

Answer 426

A1462. It outlines where a company gets its cash and how it spends that cash.

Answer 427

A1463. stockholder's equity

Answer 428

A1464. Assets

Answer 429

A1465. Owner's equity

Answer 430

A1466. Decrease Owner's equity

Answer 431

A1467. Increase Owner's equity

Answer 432

A1468. When the owners of a corporation invest cash or other assets in the business and receive shares of stock in exchange

Answer 433

A1469. Retained earnings

Answer 434

A1470. Treasury stock

Answer 435

A1471. No. Treasury stock is a deduction of shareholder equity.

Answer 436

A1472. A classified balance sheet

Answer 437

A1473. Assets = liabilities + Owner's equity - A = L + E (Hint - after the test, we're getting some A.L.E!)

Answer 438

A1474. Assets - Liabilities = Stockholder's equity.

Answer 439

A1475. The Entity concept

Answer 440

A1476. Their Historical cost - they are not adjusted for their change in value. But, financial instruments such as investment securities and derivatives are reported in the balance sheet at current market value.

Answer 441

A1477. That the company in question will continue in business for the foreseeable future

Answer 442

A1478. The amount of assets consumed from the performance of business operations; the opposite of revenues.

Answer 443

A1479. Gains and Losses

Answer 444

A1480. Net Gain or Net Loss

Answer 445

A1481. Earnings per share. EPS tells the owner of one share of stock how much of the net gain (loss) belongs to him/her.

Answer 446

A1482. 1) Is the promised work done, meaning that the goods have been delivered or the service has been provided? 2) Before recognizing revenue, cash must have been collected or be reasonably assumed to be collected.

Answer 447

A1483. Net Income.

Answer 448

A1484. Operating Activities

Answer 449

A1485. Financing activities

Answer 450

A1486. Summary of significant accounting policies; additional information about the summary totals found in the statement; disclosure of important information not recognized in the statement; supplementary information required by the FASB or SEC

Answer 451

A1487. transparency

Answer 452

A1488. Breaking down all the estimates and judgments into one number and then reporting that one numbers in the financial statement.

Answer 453

A1489. The outside auditors can give an independent outside opinion on the quality of the financial statements.

Answer 454

A1490. the info must be provided on a timely basis, be useful in evaluating past decisions, and provide some basis for forecasting future financial performance.

Answer 455

A1491. be more useful - data is stronger when it can be compared against a benchmark or standard

Answer 456

A1492. When in doubt, recognize all losses but don't recognize any gains.

Answer 457

A1493. Poses the question: Is the item in question large enough to make any difference to anyone?

Answer 458

A1494. It means that the three primary financial statements are not isolated lists of numbers but are an integrated set of reports on a company's financial status.

Answer 459

A1495. Diagnose existing problems and forecast how a company will perform in the future.

Answer 460

A1496. Common-size financial statements

Answer 461

A1497. profitability, efficiency and leverage components

Answer 462

A1498. The relationship between financial statement amounts

Answer 463

A1499. What % of $ a company borrowed to buy its assets.

Answer 464

A1500. They liquidity of the company. Essentially, the company's ability to pay its debts in the short run.

FAR 3-5 - Sheet1 Flashcards

(500 cards)